By Beth Burger

April 18, 2019 - An advisory board tasked with overseeing the state’s coal-mining reclamation fund will look into getting a reinsurance policy to help shoulder the financial burden if there’s a catastrophic demand on the money.

Coal companies that mine in Ohio pay into the reclamation fund, which goes to cleanups and restoring mining sites if a mining company folds or abandons them.

However, if one of the largest permit holders in Ohio were to walk away from its mine without rehabbing it, “That would be a burden the fund could not bear,” said Arthur R. Randolph II, principal and consulting actuary with Pinnacle Actuarial Resources.

“That would be a nightmare,” said Michael D. Cope, president of the Ohio Coal Association.

Securing reinsurance to cover a major loss could prevent draining the coal-reclamation fund and taxpayers from being stuck with the tab for site restoration.

“It’s a risk and reward proposition. How much of the fund’s current balance are you willing to part with to have that ability to sleep well at night if that catastrophe comes to bear that you’re not withstanding it all on your own?” Randolph said.

A draft of Pinnacle’s actuarial report states that if the state’s top five mining permit holders abandoned their mines, it could cost nearly $560 million to clean up the sites.

But Cope said: “Those huge numbers are overstated. We don’t believe there’s that kind of liability out there.”

If there were a massive loss, “The big question to wrap your mind around is how would you ever fund that in the short term without taxing coal companies out of business?” said Michael Sliva, who chairs the state’s forfeiture fund advisory board.

“The risk truly falls on the state of Ohio’s legislative branch. ... If we have total shock loss and we exhaust our fund, what do we do next? We go to Downtown Columbus and say, ‘Hey guys, we need some money.’ Is (reinsurance) something they want to look at in partnership with us?”

As of this month, the reclamation fund’s balance is listed at more than $21 million. Gov. Mike DeWine’s proposed budget announced in March called for restoring $5 million to the reclamation fund that was raided by former Gov. John Kasich’s administration two years ago to balance the budget.

The state’s reclamation fund pools money from all of the coal-mining companies by collecting a severance tax of 14 cents on each ton of coal mined.

Mining companies also pay $2,500 for each acre they mine. If they fail to reclaim a mining site, the state uses that money initially for cleanup. If more money is needed to cover the cost, the state fund covers the remaining reclamation expenses. The last forfeiture that relied on the state fund was in 2014.

Coal production in Ohio and across the country continues to diminish.

This year, Ohio has produced 2,034 tons of coal through April 6 — a 20.6% decrease compared with the same period last year, according to the latest U.S. Energy Information Administration report.

At a time when advisory board members are worried about the reclamation fund’s ability to cover costs in a worst-case scenario, Ohio Department of Natural Resources staff will be meeting with coal industry members next week to talk about lowering the estimated costs for cleaning up mining sites, said Lanny Erdos, chief of ODNR’s Division of Mineral Resources Management.

ODNR employees make those estimates when companies secure mining permits. A state law passed in 2008 does not allow the ODNR to go after additional money from the fund if it low-balls an estimate, Erdos told The Dispatch after the meeting.

“If we miss something, we want to make sure we have additional funds to do that reclamation,” Erdos said.

Erdos cited the state’s abandoned mine program, which rehabs historic mining sites before regulations required companies to do cleanup in the 1970s. He said the projections are actually 20% to 25% higher when compared with the amount it actually costs to do the work.

When asked if lowering the estimated liability projections could open up taxpayers to more liability, he said, “There’s always concern. That will never go away. ... There’s never a 100% guarantee. There never will be, but we’re trying to get as close as we can to actual liabilities that the state of Ohio has sufficient funds to do the reclamation. Is it ever going to be perfect? No.”